tv Closing Bell CNBC December 17, 2015 3:00pm-5:01pm EST
tonight. >> we are keeping an eye on the markets as we head into the last hour of trade, we are close to the session lows on the s&p. >> it's range so my commute will be slow to please keep my entertained on "fast money." >> i'll try. "closing bell" starts right now. hi, everybody, an welcome to the "closing bell." i'm kelly evans live today from the yale ceo summit at the wall dorv hysteria. >> i'm bill griffeth keeping the home fires burning at the new york stock exchange. today it's oil versus the fed for the market. stocks have been pulling back as oil falls again testing monday's lows, this of course after a strong market equity rally on the back of yesterday's fed interest rate hike. we will see whether the stocks can make a come back in this next hour or so, kelly. >> and we've got some big guests set to join at the at the yale ceo judgment, jim chanos, doug
yurley and tim miopolis will all be here. >> apple is getting its first chief operating officer since tim cook was elevated to the ceo position. we have the details on who he is, the new coo and what it means for apple's executive team coming up. and the man who has become the poster child for drug price hikes martin shkreli attested this morning, we have the latest from the courthouse coming up. >> let's start with the markets. following oil lower bob pisani here with me on the floor of the new york stock exchange with today's volatility report. bob. >> and it's oil stupid, again, it killed the rally midmorning when oil dropped and oil dropped at the open today, we were up ail little bit and we went straight down as oil went down. it's the lower for longer theme. if you believe oil is going to be this place the middle of next year, well, oil stocks aren't going to rally. look at chevron, a big rally
earlier in the week when oil rallied, now down 2%, all the markets down 2% in the oil business, a lot of them the big e & p stocks down 4% or 5%. lower for longer also applies to other commodities, deutsch bank downgraded steel stocks, their argument expect of a lower pricing environment to continue next year, ak steel down 6%, mitol down 4%, u.s. steel is also down rather big as well. then we have the usual problems in the retail market, pier one down 20%, they cut their guidance, second time, last three months they cut it in september, cut it again today, they specifically talked about the decline to the casual in store shopper continuing to challenge them and many of the big retail stocks are down on that as well. i've been asked why aren't the banks rallying at all, you see names like bank of america, a lot of them are down 1 to 2%. they did rally. most of these names are up 2% on
the week. this is the day after and a rail bit of a day after hangover, i suppose. bottom line, bill, if we get stability in oil the market can stabilize. if we go up a little bit in oil towards 36, 37 we could see a 4% or 5% rally towards the close of the year. that would make a lot of people positive for the year. it's all hinging on oil right now. back to you. >> all right. we'll talk about that, among other things, bob. thank you very much. >> getting to our "closing bell" exchange now for this thursday, tom lydon from etf trends.com is with us today, new york stock exchange trader jonathan corpina and rick santelli checks in from chicago. john, you've got the post fed hangover today, you have oim testing monday's lows and you have an expiration tomorrow. so is that the reason we're off today or what do you see happening here? >> i do and i think today is what of a pause. we've been waiting for this date of wednesday, yesterday, has been on our calendar, it finally
got here, we got what we were expecting and there was a lot of excitement leading up to that and trading activity leading into that. today is a big pause, tomorrow we have a big expiration, quadruple wich, s&p rebalance, russell rebalance. tomorrow gives a lot of people opportunities to make their final moves of the year, next week short week, following week a short week. tomorrow is that last chance to step in or out of this market. why make a move today? i'm not so dis satisfied with this selloff that we're having today, market is up close to 2% for the week, why not have this little sell off today. >> i wonder, tom, whether stocks as we look into next year will ultimately benefit if people are pulling money out of bond funds, do you expect them to do so or think they should do so? >> obviously they have been in the fire and that's been the big key. however, there's market risk but there's also interest rate risk, kelly. there are a lot of people that are looking for yield, especially as we go into a rising rate environment. so there have been some creative etf issuers out there, they have
done a great job of reducing rate risk, for example, wisdom tree, pro shares where you're actually have the market exposure, but virtually zero duration so you've actually got the exposure and maybe with valuations where they are today and as bob was saying in the earlier segment if oil bottoms out at these levels, especially in the high yield market, we might see some opportunities to the upside and some pretty attractive yields. >> rick, in your view are the markets turning their attention away from the fed now that we've got the rate hike out of the way at least for the time being, are we looking at oil? what else do you think the market is thinking about right now? >> i'm going the other way. i think that up a dollar -- a penny and a half on the dollar index is pretty much all based on what the fed did yesterday and you can in some fashion connect the dots to the dollar dominated commodities, maybe chain to the demand story, everyone a slice. i know oil is the big story today but how much of oil is
affected by the dollar? i think these issues are big and i continue to say, you know, mexico, not that it's the first, but they raised the rate a quarter of a point at 2:00 eastern, all these emerging markets, china's currency down a tenth day in a row against the dollar. so i think that all these moving parts really the catalyst was the upcoming fed rate hike, now post rate hike it's how the digestion process is working. we talked yesterday it might take a couple days to simmer. the fact that the one that didn't need -- the one sector that didn't need any simmer time at all was the dollar intention and i really to think in a world where any different economy like china with their currency move can try to tweak the game by begging thigh neighbor the post fed dollar you should be paying close attention to. >> how much do you think stocks are moving in lockstep or moving in an opposite direction as the dollar moves higher, stocks move
lower, is that what you think is happening? do you expect it to continue? >> i do. we're seeing the dollar up, oil down and market down. i think investors are trying to pull some correlation together. in this new environment, this trading environment that we haven't seen before or experienced before with interest rates the first move in a decade investors are looking at anything to hang on this point. some portfolios are flat down for the year, you do some trading sessions to make money back in this market. if you do see a pattern i think investors are trying to jump on board of that pattern. >> tom, are you changing anything about your portfolio mix with the fed doing what it's doing and, let's face it, this deflationary trend that we've seen with a lot of the commodities as the dollar goes higher? >> absolutely. there is a lot of discussion about currency and i think rick was dead on right. we're going to have to see the euro -- see parody and there are a lot of etfs that hedge
currency. as we're getting the year ends here there is a lot of tax loss harvesting, we saw huge money going to goldman sachs brand new etfs that were coming out of some well-established emerging market etfs. tax loss harvesting, more strong dollar hedging that we'll see in 2016 and as i mentioned before from a yield standpoint there's some great opportunity at these levels if you've got a cast iron stomach. >> rick, before we have to go let's just dwell on the dollar for one more moment because we thought that for the most part this was going to be by a buy the rumor sell the fat kind of move. it had moved up appreciably into the fed hike, why do you think it is still moving to appreciably today. >> i think there is no way to evaluate what was priced in and the axiom of it's built in, buy the rumors, sell the fact that's not the world we're living in. this is the first time a major economy is really trying to come off zero and i think how that
pans out and the dedication the fed has to buy some insurance, get rates up is going to be a dollar positive and all the other axioms that work against that to me just don't make a difference. >> all right. guys, appreciate your thoughts on today's market action. thanks. >> thank you. >> see you around. now let's get to another big story today, the arrest of martin shkreli, the ceo reviled for raising drug prices a few months ago. meg tirrell is at the courthouse in brooklyn, new york, where he is being arraigned. >> we are waiting for any news of the arraignment where martin shkreli is hearing the charge against him. we expect to learn how he had plead as well as any terms of his bail. we do know he was arrested this morning at his manhattan residence by the fbi. he is being charged with seven counts charged with defrauding hedge fund investors, misappropriating more than $11 million from his own biotech
company retro fin using it as his personal piggy bank. the maximum sentence 20 years improvement. these charges include things like securities fraud, and wire fraud. today the charges were here is one of the things he said. >> these charges in today's indictment highlight the brazenness and the breadth of skrel yeets's scheme and the outrageous web of lies and deceit waged by both defendants. >> now, saying that they want to send a message to any hedge fund managers, executives or lawyers because shkreli's outside counsel retro fin were arrested today. they are going to bring them to justice. now, retro be fin martin shkreli's old company has issued a statement saying this is a new chapter for retro phin began the day the company replaced martin shkreli more than a year ago and that decision has been vindicated by today's indictment.
we are waiting for any news from the arraignment. we will bring it to you as soon as we get it. >> meg, we are told that the investigation began last january and you have to wonder if he knew this was coming and might have affected his behavior the last few months, huh? >> well, if it did i'm not sure he did himself any favors becoming such a big target. i think people calling him one of the most hated men in the america, engaging in a lot of fights on twitter, i don't think he helped himself out at all becoming so well known. >> similarly, me go, i wonder how much that attention, that notoriety and that frankly disgust a lot of people have reacted with against him have played into this very investigation. >> you have to think that this is a target that the department he have justice really wants to publicize, they held a press conference today, people know this guy, they are paying a lot of attention to this news, he is a big deal on twitter, there's 100,000 tweets i have i have a seen about him listed in twitter
today. yeah, absolutely, i think he was definitely a target. >> and this is hardly a serious issue, but we all know he famously recently bought that infamous wu-tang clan album of which there's only one copy, paying $2 million. that's what i'm talking about here, if he knew these charges were coming he would get his last hoorah before he had to face these charges. you can imagine he's probably going to have to give that back. >> yeah, that's the question. what will the punishment be here. in the criminal lawsuit they are saying that he faces up to 20 years improvement, but in a civil lawsuit filed by the sec there are potential other damages. we will have to see how that shakes out. the fbi saying that this is really only the beginning of their investigation and there could be more information to come out. >> all right. crazy day. thank you, meg tirrell. we will be getting more details from you as they become known in afternoon. heading to the close right now,
kelly evans. 48 minutes left in the trading session here, the dow was down more than 190 points on the open this morning, now down 163. >> and we have a full line up here at the yale ceo summit out of the wall dorv hysteria. jim chanos and doug yearly among them. find out how the fed rate hike alters their business strategy. >> apple gets a new chief operating officer. is this a sign of a success plan emerging already? we'll discuss that coming up on the "closing bell." when you do business everywhere, the challenges of keeping everyone working together can quickly become the only thing you think about. that's where at&t can help. at&t has the tools and the network you need, to make working as one easier than ever. virtually anywhere. leaving you free to focus on what matters most.
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years. joining us at the yale ceo summit is doug yearly the ceo of toll brothers. the fed has moved rates higher does this mean home prices will go lower? >> no, i don't think so. it's been nine years since there has been a rate move. we've been expecting t i don't want to say we welcome in, but we're fine with it, interest rates having around 4%, less than 4% now for as long as we can remember and a modest move in rates because of a good economy which is the messaging around this move i think i think is very encouraging. we're thinking that this is going to brings out some pent up demand, move some demand in and we're optimistic about where we go. >> usually interest rates go higher and your money can't go as far as housing prices come under pressure. do you think this time around it doesn't happen for the same reason or is it because you don't think interest rates will go that much higher. >> i think interest rates will go modestly higher, i don't think you will see 30-year rates
which is what we depend upon to go up as much as the short term rate, i think the fed will be deliberate as at the continue to raise rates and it will be tied to an improving community. we did expensive homes, our buyers put 30% down, mortgages haven't been a big iron to you to them. we've done better as a company in modest inflationary times because our buyers can afford the homes. we like this kind of environment. >> bill. >> doug, bill griffeth here. i'm curious on this demographic play that you have to keep an eye on, you know, you are the luxury home builders to theoretically these are the people that are trading up to buy a toll brothers home. who are those people? boomers are getting into their retirement years, presumably they want to downsize, the millennial generation which is even larger than the boomers they're renting they are not ready to buy even the starter home at this point. who is it that's trading up to buy a toll brothers home and how many of those people are there?
>> well, bill, we really do it all now. we are on our 29th high-rise in new york city. we do a lot of active adult which is the 55 and over boomer crowd that is moving down, of course, we do a lot of move up and we're also doing more and more apartments for the millennials. anything to do with luxury for sale and rental hogs, using we you to think of toll brothers. but there are still plenty of families in their 30s or 40s that maybe aren't defined as millennials or defined as boomers that are looking to move up. they have been on the sidelines for the better part of a decade and we have a lot of demand for those houses still. >> this touches on the availability of people to get a mortgage, ease the cost and so forth. on fannie and freddie, the fed raised interest rates yesterday but they are still stuck in conserve forship, do fannie and freddie need to stick around in their current form to support the housing market or would it be fine on its own.
>> i don't think it will ever be fine on its own, i think we need government backing of the mortgage business, that's been the way it's been forever and it has worked really well except for a couple really bad years in mid 2005, 2006. i think it will be a change over time, but i think it's going to be done carefully and it's going to be a long-term modest change. right now i don't think the administration or congress is going anywhere near it, but there will be some modest fannie, freddie reform, but i think it will be rolled out slowly and have any impact on our business. >> we still need to ease the underwriting for mortgages. >> last time you were on cnbc you said that that period between 2007 and '11 was the worst housing market you have ever seen. we are not fully recovered yet. how long is that going to take and does the rate increase complicate that? >> absolutely a '7 to '11 was the worst housing depression this country has ever seen.
we are now four years into a recovery. i would say we are in the fourth inning, it's been a modestly slow recovery and i think this move in rate is actually good news because it's tied to an improving economy and these rates have been so slow to move them up one quarter point, even half a point in a better economy i think is great news for the industry and for the country with the economy. >> doug, you mentioned some of the trends that you're seeing, going into apartments, trying to play to different ways that people are living today but we also got a jump in traditional home building yesterday. what is your expectation for that market? is it going to continue to gradually improve? is it possible that there might be some back to normal behavior with millennials ultimately buying homes? >> millennials have delayed the home buying decision, they're getting married later and having kids later and they didn't get the jobs out of college they thought so some are on mom and dad's couch. they all want to own a home, it's being delayed. we feel good about what's coming for the next few years.
this recovery has been so slow we are only building 1.1, 1.2 million homes a year, the average is 1.5 million. we still have a ways to go to get to normal demand. that's why i think we're early in the recovery. this will be a longer slower recovery than i think we thought i think which is encouraging. >> it's already been the case still like the little engine that could. doug, thank you so much for joining us here. >> thank you. >> doug yearly is the ceo of toll brothers. >> by the way, dow sit hitting lows for the day, down 196 points. we have a news alert on volkswagen creating a claims program led by, who else, ken feinberg. phil lebeau has the story. >> if you are a cooperation, you have big problems and you are not sure how deep it will go in terms of the financial risk, you bring in ken feinberg. he did this with general motors with the ignition switch recall issues and now he is going to be doing it for volkswagen. volkswagen announcing this afternoon, we had a chance to briefly talk with ken feinberg
about this. a diesel emissions claims program, completely independent of volkswagen of north america. 482000 diesel models impacted because of the rigged emissions by volkswagen. that's going back to 2008/2009. in the statement ken feinberg says we hope to have a claims program designed as expeditiously as possible. in order to do so we will need the input not only of volkswagen but also vehicle owners, their lawyers and other interested parties. as you take a look at shares of volkswagen, keep in mind that while there may be a half million vw diesel owners who are upset and believe they deserve some form of compensation, keep in mind there are a number of dealers not only vw brand dealers but also used car and independent dealers who are saying, wait a second, i'm sitting on a diesel model that i can't sell? i deserve some compensation as well and, again, we're waiting to hear full details on how this program will be set up. guys. >> all right. phil lebeau, thank you very
much. he has this down to a science, ken feinberg does, the ignition switch project, the bp coil, the bernie madoff fund and volkswagen fund. >> the dow now down up to lows of the session for the day, down 201 points, that's a key level for the s&p at 2048 which we will talk about in a few minutes. more big names coming up from the yale ceo summit with kelly, we have the ceo of fannie mae, also noted short seller jim chanos both weighing in on the game changing potential of a rising rate environment. apple moments a long time executive to the c suite, jon fortt has that story and the impact on the company when when come back. e come back.
dow coming off the lows now down 170 points at 17,000. we can show you how the 30 stocks in the dow have been trading today, only three are positive, the best performer is united health, followed by nike and mcdonald's, looks like caterpillar and chevron are among the worst performers in today's trade. meantime, apple is promoting the head of its apple watch project, jeff williams to the role of chief operating officer. jon fortt joins us with more on what is probably a pretty important story for apple. >> in a way. first of all, apple says we should not read this as any kind of de facto succession plan because he is getting the title
that tim cook used to have. he is a supply chain guy, logistics guy whose job is to make sure the factory is running on time. it is the job tim cook had before he took the reins. he has the title that cook had, too. williams i'm told is actually going to be doing most of the same job he had been, although i will imagine he has more help and more time to dedicate to projects like that mythical apple car. also long-term marketing chief phil schiller is going to run all of apple's app stores across the phone, the watch, the tv and more. i imagine schiller will quickly get to work fixing the mac app store which has had develop err grumbling lately. it is a shift in the type of projects apple is focusing on these days. services are taking a bigger role, whether it's apps, content, payments or just retail and the company is trying to adjust to reflect that. also apple has to retain long-time execs, many of whom have been there more than a decade and in many cases are
probably worth hundreds of millions of dollars. they don't have to work anymore, tim cook has to keep them interested. >> jon, what do we know about williams i think you said it is, what do we know in terms of bio or personality or anything about this guy? >> he was the at the code conference recently. he is not a flamboyant parenty, he is more in tim cook's mode in the way that he presents. as many supply chain people, are very focused but overall this is a cohesive team, not someone who ruffles a whole lot of feathers internally, focused on getting the job done is the reputation he has, kelly. >> i'm going to throw you a curveball. in john williams is not to be seen as a potential successor to tim cook, who could be? if we're talking about somebody inside the apple company. >> well, bill, i wouldn't say that jeff williams is not a potential successor, i think apple is just saying don't think that this is the company saying he is the guy. i mean, before angela aaron's
even came on board to work at apple she was seen as a potential successor. she was a ceo before she came to apple to work for a ceo. apple is so big in terms of the share of some these products, the app store is a multi-million dollar business on its own. in a way these are little companies that these people have purview over but at the same time apple has a flat structure so they operate as a single company. it's a complicated puzzle that tim cook has to put together in terms of how to manage this one. >> jon fortt, thank you. see you later. >> time for a consumer news update with morgan brennan. >> here is what's happening at this hour. u.s. authorities have arrested enrique marquez, a friend of san bernardino shoot syed rizwan farook according to the "los angeles times." the 24 marquez legally purchased the two assault style rifles used in the attack that killed 14 people and injured dozens more.
the white house says defense secretary he is ashton carter's use of a personal e-mail account was inconsistent with administration e-mail policy. carter has admitted he made a mistake. paul ryan has a $1.1 trillion spending bill gives everyone something to cheer about. republicans are cheering the removal of a 40-year-old ban on crude oil exports while democrats are cheering five year extensions of tax credit for wind and solar energy producers. the lawyer for dennis has stert said the former speaker had a stroke during the first week of november and has been hospitalized since. hastert pleaded guilty in october of a felony count of evading banking laws in a hush scheme. back over to you guys. >> thank you very much. >> we are heading to the close, in fact, going into that critical last half hour of the trading day. right now with the dow down 183 points, a leading trader will tell us what he's watching into the close when we come. brad castiama will be here
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man we call sarge, steven guilfoyle. there's one number you've been keeping an eye on today, 2047. >> 2047 is our technical level. as long as we don't break that sometime today there has been no technical damage whatsoever. >> we've touched it a couple times today. >> we touched it twice today, but this is a dollar story today. >> we talked about how oil going lower that is put downward pressure on stocks. the strong dollar has pushed oil lower. >> and gold, too. if you take energy out of it, you can trade this market quite normally. >> we have expiration today, a big one, too. how is that affecting trading going into the close today, do you think? >> you know, today is probably going to be a little quieter than usual going into the close, we have a basket of earnings in the morning, there are a few plays for the home gamers going into the bell. >> a lot of big things happening tomorrow, we will keep things lively.
>> it's going to be interesting. >> thanks, sarge. see you later. kelly. >> all right, bill, we're live from the yale ceo summit in manhattan today. joining me in an exclusive interview is brad catsuyama who gained note right after michael lewis' best seller "flash boys". >> you guys have been busy and to 16 should be a big year if and when you finally get approval to be a financial exchange. the closer you come to that step the more blow back there is cl you go from the new york stock exchange and including from citadel. are you going to get it done? are you surprised by the criticism? >> not surprised. anytime you try to do something different, anytime the disrupter or new entrant comes in the establishment does what it can to reject that new entrant and i think what we're facing now i think was expected, i do think that, you know, the critique and where it's coming from gives us a huge amount of conviction that what we're doing is the right
thing. this has brought out a tremendous amount of support for us. >> the one things you guys do differently from the established players is that you have this speed bump which slows all incoming orders, puts them a level playing field, if you will, but again, citadel and others have said that's going to hurt market performance. citadel routes a lot of retail brokers liars td ameritrade they're saying it could be bad for retail investors. >> the speed bump which really does make us different is 350 million i don't know it's of a second, microsecond. from a long-term or retail investor it doesn't matter for anyone looking to buy or sell stocks. looking to own companies. what it does matter to i guess a subset of the market who are looking to react to real buyers and sellers, 350 microseconds is a long period of time so they are very upset. on top of that the exchanges are the ones that are selling incremental microseconds of
speed so they definitely don't want the markets to stop prioritizing speed as the number one method of competition. again, i just think it's good for the market, the market needs competition. what you're seeing in this comment period is evidence the market needs competition, we're pretty happy with where we stand and what we've put forward. >> brad, this is bill griffeth. i'm still trying to get my head around this 350 microseconds and how much of a difference that really makes. does it make you -- i mean, it slows things down to level the playing field, not appreciably, but does it make you less competitive with other exchanges assuming you get to become a trading exchange, and for that reason is your goal more to give a fair trade rather than a faster trade? >> yeah, that's a great question. i think absolutely, you know, we are looking for real investors, people that actually want to buy or sell stocks. we are not looking to be a place that sends informational signals
and that sells those advantages. i do think we second nice volume in today's market by slowing ourselves down, but our goal is long-term. we care about the long-term and by getting more long-term investors around our market we think that will lead to a lot of success, you're right, our number one priority is protecting the investors' interests and it's not speed and i think that's what competition is all about. >> you have made inroads with your market share, 1.5% of all daily stock trades. with the support from firms like an oppenheimer, southeastern, virtue, what is it that they see and say is attractive about the platform that you guys offer versus some of the others? >> i think the number one thing is their philosophy. we care about real investment. asset managers and brokers, but even someone like virtue, i think that comment letter was very important because they are an automated trader, they provide liquidity, they are classified at times as a high frequency trader. what they're saying is 350 microseconds does not matter to
them and their ability to provide liquidity. it's why we designed our ma rkt in a way -- we didn't slow it down by a second, we picked an increment of time to ultimately prevent people from scalping real buyers and sellers. >> when things shake out in a couple years' time do you think there will be more or fewer exchanges than what we're looking at today? >> i think fewer. it's interesting to add another exchange is going to start defragmenting, there are 11 exchanges, ten of them are owned by three companies, i don't think that's competition, which is why the establishment is fighting so hard against iex, i think there already less. >> brad kastiyama. >> we brought you the news that ken feinberg will be overseeing volkswagen's new claim funds, phil lebeau joins us where mr. feinberg. >> ken, how did this deal with volkswagen coming together in terms of you agreeing to oversee a fund for claims?
>> over the last couple of weeks i've sat down with volkswagen here in north america right outside of washington, d.c., and we discussed the desire of the company to set up some sort of claims program, similar in structure to the 9/11 fund, the bp oil spill fund, the gm ignition switch fund to see if it would be possible to develop a program that would voluntarily encourage individual eligible car owners to come into the program instead of litigating. >> and, ken, i'm curious, the parameters haven't been set up yet so it's unclear if this would simply be more those 482000 diesel vw owners in the u.s. who are impacted by the rigged emissions or whether or not it might be expanded beyond that? >> again, that hasn't been decided. i must say my understanding is we're talking about north
america, but, again, no final decision. you're right, we're just beginning to sit down now as we did a year and a half ago with general motors and plan a protocol that would encompass eligible vehicles, and a determination of what type of vehicles are eligible for a menu of remedies. >> mr. feinberg, bill griffeth here. i don't mean to be indelicate but i'm curious, it's fascinating the career that you've carved out, this franchise between the bp oil spill, the ignition switch at gm, the bernie madoff fund and now volkswagen. how are you compensated if you don't mind my asking, do you bill by the hour or do you get a percentage of the fund that you administer? >> well, clearly not the latter. now, remember, when you -- when you say how do i get paid, don't forget, 9/11 victim compensation fund, that was pro bow know for 33 months. >> yes. >> one fund boston, the aurora
colorado shootings, the virginia tech shootings, the connecticut shootings, all pro bow know. now, you're right, bp i was compensated and gm i was compensated and volkswagen i'm compensated. you will have to speak to volkswagen about the parameters and scope of my compensation but it has nothing to do, i can assure you, with how many claims come into the fund or how they are treated or how they are paid. that is -- that is certainly not the case. >> i was not suggesting that by any means. i was just curious, this niche that you've carved out for yourself over the years, you know, you truly you have developed this blueprint for how you, you know, value a life or whatever it is you're doing in a particular fund. i'm just curious how you do that compassionwise but you've answered that question now. >> also, you know, you've raised an interesting point here. fortunately, fortunately with volkswagen we are not talking about deaths or physical
injuries. >> right. right. >> and that is, of course, a major fortunate factor here. this is automobile property and automobile -- an automobile fix or a solution rather than death and injury, which is fortunate that we don't have to deal with that. >> indeed. >> and, ken, one last question. given the fact that you are not talking about the loss of life and certainly not millions of vehicles, do you expect this to be a fund that you could wrap up so to speak relatively quickly? >> well, that's a great question and it's what you mean by relatively. i think, yes, we would hope that in contrast to the conventional litigation system where claims can drag on in court for years, we would hope, as with 9/11, bp and gm, to come to a fairly efficient and swift processing of these claims, but here of course we have not yet sat down with the company, with the
lawyers, with the lawyers for the owners of the cars, with regulators to determine what the menu of remedies will be in a fund like this. and that will be a very, very important aspect of the whole program. we haven't decided that yet. >> ken feinberg, attorney who as bill griffeth would say has really carved out a niche when it comes to figuring out the compensation for some of these issues when they have arisen, he did general motors ignition switch and as we were talking to him about he is now going to be in charge of the independent claims for these vw diesel emissions claims. >> i'm embarrassed to say i forgot all about the 9/11 fund of all things, too. phil, thanks very much. our thanks to ken feinberg for his time, too. heading to the close, 15 minutes left here with the dow down 179 points, we will have a more special guests coming up from the yale ceo summit, faen may's ceo gives us his take on what the rising rate environment could do to the housing market
welcome back, breaking news on martin shkreli. let's get to meg tirrell with the story. >> we are getting news out of martin shkreli's arraignment here outside the federal courthouse in brooklyn. he is out on a $5 million bail. two men who identified themselves as family members signed for his bail. as part of this arrangement his travel is going to be restricted to the eastern and southern district of new york. he has surrendered his passport. his lawyer, evan grabel who was the outside counsel to his old biotech company also out on a million dollar bail. the next time we will see him in court this status conference is january 20th. until then as part of the terms of his bail he can have no content with current or former retro if i know employees or employees of his hedge fund msnb
capital, msnb healthcare except those who for for turing pharmaceuticals. i apparently he is able to continue working at turing. after this arraignment we know he is out on $5 million bail, kelly. back over to you. >> all right, meg, thank you very much. meg tir rel with the latest. we are heading to the close, ten minutes left on the trading floor, the dow down 176 points. when we come back dan suzuki sounds off the warning on more dividend cuts to come in a particular area of the economy. what that could do to stocks coming up. olay regenerist
less than seven minutes to go. art cashin just stepped by. 700 million to sell is the imbalance going into the close here. we were down 192 points right now on the dow jones industrial average heading back to the lows of the session here. joining me at post 9 dan suzuki from bank of america merrill lynch. are you changing anything investment-wise now that the fed is starting to raise rates? >> no, i don't think so. i think there has been a lot of noise made about what the fed
did but the reality it came right in line with expectations and they will be super gradual. i think this reversal of the reaction you saw yesterday makes a lot of sense to us. we knew there was going to be a little volatility, but once the market digests this i think that sets up for more smoother sailing going forward. >> you are keeping oon eye on dividends in a particular sector. >> that's right. if you're looking overall for the s&p you are only seeing 3% of companies cut their dividends relative to last year, if you look at the high yield markets the spread is widening that typically precedes more dividend cuts, we are probably in the early stages of more cuts to come. >> where would you see that happening? energy? >> where you're seeing huge revenue and profit declines which is concentrated in the commodity sectors but also some of the weaker lower quality retail companies, et cetera. what's interesting is not only do they underperform the market in the first month of the cut which is by about 3 percentage points, but that
underperformance is pretty sticky. if you look out over the next six months they typically underperform by 8 percentage points, this year has been more than double that. >> dan, thanks for stopping by. we will come back, we have the closing countdown for this thursday. after the bell kelly, more special coverage live from the yale ceo summit at the waldorf, she has exclusive interviews with jim chanos, fanny may's ceo tim my op police and david stern. what has david stern been up to since he retired? we'll find out coming up. you're watching cnbc first in police worldwide. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place that lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim?
leaving you free to focus on what matters most. right at the two minute mark before the close, let's see how we're doing with the dow down 220 points, setting lows for the session here. i'm going to look at charts, bob pisani, for the week to this point. we have the rally leading up to the fed announcement and the dow itself with a gain today -- or the decline of 222 points is down 1.5% for the week so far. there's that. no, it's up 1.5% for the week. it's oil, we will look at wti, that is down 1.5%. isn't that an interesting correlation there. >> we saw that, yes. >> i love that. dollar index, we take a look at that for the week, it is down 1.62%.
now, it's up 1.62%. i missed my point there. and the ten-year leading up to and including the fed rate increase we are at 2.23%. >> and the dallas is -- >> how did i do on that? >> one out of four isn't bad. >> okay. >> the important thing is we've got a make a call on oil, it's going to ruin or year-end rally. it happened yesterday, market was up, oil went down and we lost 150 points in the dow immediately. today we started on the upside and immediately as oil went down the market went down with it. we are closing essentially at the lows for the day. >> tomorrow a big expiration day. >> the prices for the s&p is the opening price, that will be the final price to close out the quarterly expiration, 2015 is a big of strike price, we are below that already. we've got to get oil to stabilize. unless we get it the market doesn't act in any kind of stable manner. high yield also moved down throughout the day as oil was moving down, high yield moved
down today, hyg ended at the lows of the day. >> thank you, robert. going out with a decline of 250 points. folks from vwx technology ringing the bell at the billboard, at the nasdaq its israel bond. it's kelly evans with the second hour of the "closing bell." see you tomorrow, kell. >> thank you, bill. welcome to the "closing bell," everybody, i'm kelly evans. yes, live here today at the yale ceo summit at the waldorf astoria. let's begin with how we're finishing the day on wall street. red arrows giving up yesterday's relief rally after the federal reserve raised interest rates for the first time in almost nine years. today a very different picture. we had declines of more than 200 points or so on the dow, the slooep and the nasdaq. coming up we're going to hear from famous short seller jim chanos on yesterdays fed moves.
there's the dow settling down 252 points. let's get to today's channel. we have our own mike santoli and cnbc contributor carol roth and also for more on today's market action "fast money" trader brian kelly. mike, i will just begin with you and some unusual things happening today. the dollar basically surging and utilities leading the way. >> it's odd. i don't think it was necessarily some kind of a wholesale rethinking of the fed move reaction yesterday, but definitely it was a reminder that there was no real escape from the same dynamics that have been driving this market all year, which is range bound action, you get oversold and then you rally and then you are kind of stuck in a range for a while. that utilities rally that you mentioned is very telling. you have yield oriented sectors really leading, even from yesterday afternoon's up moves. what that tells you is people are craving some kind of bond substitutes, they want income, they don't really think that long-term treasury yields will
go up very much. the expiration affect that bob was talking about you can't really decipher exactly what was going on. instead of oil and credit still kind of dragging us around. >> right. and, carol, we haven't seen you since that rate hike yesterday. what do you think about the fed's decision to go forward with it and the further impact it could have on markets here? >> you know i'm somebody who has been in the camp that the fed shouldn't have intervened at all let alone been intervening all of this time. i think it was something that was way overdue. that being aside, was this a great time versus september or some other time where they could have raised it? probably not. but net-net i'm not sure that it's going to have that much of an impact in the short term. the question is in the long-term as the rates continue to rise, as they try to unwind their balance sheet, i think that that is where we're going to have the big issues. the other thing, kelly, today as we look at oil and the impact that it continues to have on the market, i think there's one piece of good news that pretty
soon it's going to be free so we are not going to have to worry about hedge dragging down the market anymore. >> we will have more on that in a little bit, too. brian kelly, i noticed that you also when people were talk being is this going to be a dovish hike and it was like it looks like it is and the feds pulled it off. do you still that whole framing and this decision was also a mistake? >> i think -- well, two things. one the decision was absolutely a policy area, unfortunately the fed had backed itself into a corner. no matter what they do they were going to make a mistake, either destroy their credibility or make a policy error on the economic front. in terms of how the market has reacted, though, that dovish hike in my view the fed was trying to talk down the dollar, that has been doing much of the damage here. what happened today, complete failure on the fed's part, the dollar is surging, oil is falling and now the fed, again, is in one of these tough situations. in my view i think that's probably the only hike we see. >> mike, what would you say to
that? >> i don't think that you can at all say right now it's the only hike we'll see. i mean, obviously, i think we are still, believe it or not, trying to digest whatever the aftermath was for this huge whipsaw after the etb surprise and you really cannot make any lot -- i don't think you can draw strong conclusions out of the macro moves. i totally agree this was not a universally convincing dovish message because i honestly think the fed wants to preserve whatever flexibility it can going into next year and it genuinely does not know how many they might have, but, look, bottom line the atlanta fed realtime gdp indicator is showing 1.9% for the fourth quarter, nobody wakes up today and says we are going to take off to the up side in terms of an economic acceleration. we are stuck back in that range. >> mike, i will say you mentioned that they want to preserve flexibility and maybe it gives them a tiny bit more flexibility. i'm not sure that it preserves any credibility if they keep coming out and saying that we're going to be data dependent, data
dependent and data is the only thing that's going to drive our decision. i don't know that they get a lot of credibility points off of doing that. >> they may not get -- >> carol -- >> if you don't think they have credibility for navigating us to 5% unemployment without inflation you're not going to think they will get any credibility about what they say after the first rate hike, i suppose. >> mike, what about oil? let's go back there for just a moment because this is a pivot point for so much of what's happening in the market. the strong dollar today not helping. look at some of these big names taking it on the chin again. i mean, are we now going to have to look at how much further it could still fall or is it even at these levels a problem? >> it's amazing. look, even the weather is not cooperating still, we still haven't gotten cold and natural gas remains another reason for the energy complex being weak. yesterday you had 29 big oil companies put on a downgrade watch for their credit. this is a continuation trade, this is we don't know where the bottom s we were trying to find the bottom too aggressively when crude watt at $40.
it seems still in liquidation and nothing is going the right way. i don't know if this is just about, hey, for the rest of the year nobody wants to get in the way of this or what. >> right. >> kelly. >> what would you say to that, brian kelly? >> a couple different things. one, i have been on record saying i think crude goes to $25 a barrel, that's based on the fact that that's the marginal cost of oil for many of the producers, saudi arabia is thought to be somewhere even close to $10 to $15 a barrel. in a price war i think you go down to that. what we're seeing is that negative feedback loop now feeding into other markets. so you're seeing that in the high yield market, that's starting to spread so some of the telecon area, consumer services. that's what you're starting to see happen here. to me it's right that the equity market is selling off because a lot of these debt deals, the earnings and financial engineering is based on the fact that you need to borrow money to buy back stock. >> yeah, but that's -- i mean, it's still relatively low, brian. i guess what's interesting about what's happening right now is is it yet another speed bump of the
kind we've dealt with in in rally including greece, including china or is this something unique? is it something that itself is indicative that this whole rally, this whole cycle is ending? >> i think there's three pillars to this whole rally, one was the china growth story, which in august when they devalued that pillar crumbled. number two is financial engineering which i was just talking about, if you get higher yields it becomes less attractive to financially engineer and then the third one which i would still say is up in the air is the fact that central banks actually can do something and can keep asset prices up. they have been able to do that for seven years now, so that has not crumbled yet, however, if the feedback loop takes place and we start to see asset prices fall that have be the third pillar that falls and then you have some problems. >> it's carol roth. in terms of the financial engineering aspect, raising the interest rates one time, if you are in the camp that believe that will raise it one time that's not going to affect their
borrowing. maybe you can say there's two things coming together it's not just the rate but it's also the ease of the capital that the availability is going to contract a little bit, but i think that that's not something that's going to happen probably until at least the back half of next year. >> i didn't mean to imply that the 25 basis point rate hike was going to impact corporate borrowing. what i'm worried about is the high yield borrowing. if you look at what's going on in the oil sector several analysts are saying it's okay to buy some of these big oil companies, worst-case scenario all they will do is borrow money to buy back stock or pay a dividend. >> they're going to do stock for stock mergers. >> i'm not -- that's fine, but is that really a pillar of a market? >> no. >> not at all. >> you know that i've been saying that all along but i still think that that pillar unfortunately is propping up the house of cards for maybe a little longer. >> with the financial engineering it's slulg propping up the house of cards. we already know that. take a look at a company like
ibm when you start to lose the financial engineering or believe in the financial engineering it falls apart. i think financial engineering has been a huge part of this market rally. for good or bad. >> i think you are arguing about the last remaining leg of a shoddy stool. we will leave it right there. thank you very much, brian, for joining us this afternoon. stick around, everybody, to catch more of brian kelly and the crew coming up on "fast money" at 5:00 p.m. wall street's biggest bull will reveal why he thinks we can see double digit gains for stocks next year. jim chanos will join knee with his take on the fed decision. we will also update on the short positions that he has in solar city and is that near and tim mayopoulos will give us his read on what rising rates mean for the home loan market. you're watching cnbc, first in business worldwide. (trader vo) i search. i research. i dig. and dig some more.
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exclusive it's hedge fund giant jim chanos he is founder of kynoikos associates and he is short solar city. good to see you again. >> good to be back. >> let's begin with the position that you still have which i assume you still have? solar city. >> we are still short. >> the government will now offer another five years of tax credits. why do you think this company is a bad investment? >> i think that the itc was clearly good news for the industry but for slal city unfortunately it's not a technology company. i know we had this debate on the air with the ceo. it's a finance company. and they own the panels so the it c, they keep and they farm it for their equity, but the deal to actually residential customers is not a great deal. it's not a great deal for solar city customers -- or shareholders, either. if you look at the company and you eliminate almost all their expenses, you assume they didn't market, they didn't knock door to door, they didn't have an administrative thing, the return on capital is about 7% and even
with the move in the stock so far this week the company's bonds yield more than 7%. the company is burning $500 million a quarter. so all this itc extension will do is enable them to keep burning hundreds of millions of dollars per quarter. >> that still could be a difficult position to be short, couldn't it? as you know as much as anybody you can be right about the fundamentals and yet still have the wind blowing against you for quite some time. >> i wish i could borrow more. the stock is hard to borrow. >> what about other plays in solar because the cost of this technology is coming way down. i think i read that in the five years since the first credits were passed the cost is down 90% for solar and wind and by the time these phase out it could be cheaper than coal and natural gas. >> that's part of the problem with solar city. you are obligating the people who you are leasing the panels to putting on their homes 20 years of rising prices and i think that ultimately these become liabilities for the solar city customer and the advance in
technology and we're pretty bullish on the advance in technolo technology, we think solar will be rolled out much more quickly than people think, works against the residential solar model. so we are not bear i wish on solar, we're bearish on the guys who are working on your door trying to put solar panels on your house. >> are you bullish other parts of the solar market. >> i think what's going to happen is that you're going to see this connection between solar and electric vehicles and i think that's one of the more interesting things that not only people are talk being -- >> solar and electric vehicles. >> we are going to get auto makers, we are going to transition their fleets much more to electric. >> like ford, bmw, even including tesla's popularity. >> there are published reports bmw is saying the whole fleet might be electric by 2025. major manufacturers, tesla was the vanguard but major manufacturers are putting their fleets to electric.
imagine a world in which most of the vehicles are electric and yet they are powered off the grid by natural gas and solar. so you reduce coal emissions and you reduce burning oil. 80% of all petroleum demand is transportation. >> so you raise the central question of the market again today what is going to be ultimately the price for oil? if what you're talk being is replacing gasoline in our cars with solar, with electric for good does that mean that the oil price stays much lower for a much longer period of time? >> who knows over the next weeks or months, i'm not a commodities speculator, i have no clue. it's down an awful lot. having said that i think if you were to look out five or ten years if i was a member of opec i would be pumping as much as i could today while it's worth something because it might not be worth a whole lot by 2030. >> are there companies -- i think a chevron you were short at one point. are you still? >> you can be pretty much sure we are short all of the major leveraged oil companies. >> are any of them not leveraged?
>> there are some that aren't. >> so that means that when we look at those who are under duress and we mentioned earlier what happens, what if they start to just combine and swap stock in order to do so, is there a way they can bail themselves out of this situation. >> keep in mind that the commodity itself, brent is down 60 some percent, some of the large majors their stocks are only down 20% and their cash flows are getting really, really under, under, under duress, but they're committing to pay the cash dividends so the stocks have held up. in effect they're borrowing to pay their dividend. in the exploration and production space a little bit different. there we don't believe that the model works, we don't think the model worked at higher prices because the wells deplete too fast, you constantly have to reinvest to keep your production constant. it's a whole different story than the integrators. >> if it looks like the future might include a grid powered by natural gas and solar. we're talking about the impact
on gasoline. i want to go to natural gas and specifically liquefied natural gas. this is supposed to be a benefactor of this trend over time. why is the price of natural gas itself so low and why do you think that a company like shanier making a play on liquefied natural gas is so poorly positioned for the future. >> lng is a different story. it reminds us more of sort of the hard commodity story of five years ago, iron ore, copper. there is a decent demand for lng but the demand has stopped and has been flat now for a few years. the problem is everybody wanted to get a part of that is correct they wanted to be part of the china story, the asia story, so capacity in the lng business is about to skyrocket, it's going to be up 30% in the next few years and up as much as 80% if everything gets built in the next six years. that is a problem because demand isn't going to get up there. so all of this capital that's
going into lng plants is going to be a very, very low return, shanier is paradox clee in a better position because they have their so-called taker pays where they can guarantee a certain amount of cash flow. if you look at the cash flow that's guaranteed minus expenses, minus interest and minus the real maintenance capital expenditures to maintain $30 billion worth of steel in the swamp the returns to the shareholders five and six years out are going to be de minimis and the stock still pricey. >> let's pivot from energy to talk about pharmaceuticals, turing pharmaceuticals ceo martin shkreli has been in the news for other reasons going back so some potential fraud at a prior company, valeant was a name you were early short on. is there any relationship between the two companies that you can use to explain why you think some of these pharmaceutical plays might turn out poorly for people who are quite excited about them? >> i think each of these stories is different.
we just got out of the jeff son en felled summit and the last session had to do with pharmaceutical pricing among other things. one of the participants was talking about gal yad's drug. >> the hepatitis c. >> and how expensive it is, at the end of the day because it's a cure it ends up saving the system money because of lack of chronic -- >> you are not hospitalized, replacing the liver. >> but then you look at things like valeant's dermatological drugs or toe fungus drugs which prices were raised 800%, 1,000%, whatever they were and you begin to wonder will society -- is that really going to move the needle in healthcare costs or is it just simply people paying that don't realize they're going charged this much. in valeant's case it's more the latter than the former. >> in valeant's case you remain short even though shares are down significantly. >> we remain short. they are up quite a bit from the lows. we don't think the model works.
the company has free cash flow, it's going to be down in the fourth quarter versus fourth quarter a year ago it looks like that that $5 a share assumes no amortization of the purchased drugs and they have $43 billion end vested in their a company, half of that is r amp d and if you write that off over ten years that's $5 or $6 a share. >> and drawing a beat from that to other companies. >> you have to do it company by company and drug by drug. they have all different and the compounds are different and the pricing mechanics and the payers. the one thing that i find shocking in this whole valeant story is just who were the payers who were dumb enough to pay these prices because it's not generally medicare reimbursement, it's not government, it's private payers, who is paying $8,000 for a toe fungus treatment. >> that sounds like the next possible chapter of the story. before we run out of time another chapter of the china
story today, it appears regulators are going aftermarket participants, trying to figure out what role they played in that sell off this summer. where specifically are you short china and how do you think 2016 plays out? >> as you probably know we are not short stocks in china, we are short some of the eight shares in hong kong, financials, real estate, some of the same names, mccaul, we're cut balk or hard commodities. this is a credit story and the latest move in the anti-corruption drive into the private sector is a whole new chapter now, prior to this it was party members, now it appears to be going into executives. >> private sector. >> not just in banking and finance but in the corporate world and i would think that, you know, that's going to have all kinds of unintended consequences for people in china. >> and the growth rate there next year de minimis. >> whatever they say it is.
>> jim, thank you for your time this afternoon and joining us. >> my pleasure. >> coming up, fantasy sports are still under the microscope as regulators decide whether or not it is gambling, david stern will join me at the yale ceo summit with his take on this whole thing. also as we were discussing oil dragging down the market again today. it's not just investors who are paying attention, the fed also noting crude's free-fall in yesterday's statement, we will get what a rate hike could mean for commodities next.
welcome back. oil weighing down markets again today and the federal reserve has indicated it's paying attention. deerd bra bows is a joins us. >> conventional thinking around this rate hike has been dollar up, oil down. you have seen that play down since the fed decision and throughout the session today. however, when you take a look at what has happened historically you have seen the opposite take place. we take a look at the past four rate hike cycles since 1990, to e how oil and dollar have done. this may surprise a few people out there. take a look at oil in 1994, the decision has made in february, six months later oil was up some 13%. you have seen that pattern carry over in the other three instances as well in '97, '99 and 2004. take a look at the dollar index as well. this has been a crowded trade in light of the fed's decision long dollar, but what has happened is in the six months after that
first rate hike you've actually seen the dollar decline in most cases except for '97 the dollar has lost ground after this first rate hike. when you look at the average returns over this time it is quite interesting. you've seen oil up nearly 16% on average and the dollar index down some 3.7%. the question that asks now is what we have seen in the market currently does that support what we have seen in the past or is this a temporary blip and you will see that pattern take place six months from now. back over to you. >> thank you. mike, after hearing from jim chanos said as well about demand for gasoline you have to wonder where that leaves the oil price. >> it does. one of the things that's clouding a lot of these analysis is the set up before this first rate hike was unusual. you have these inflationary pressures building, you have the economy starting to run hot by the time the fed starts to raise.
we did not have that this time. you don't know exactly whether the same segue is there for these market patterns to play out the same way. >> exactly. all right. we have some breaking news on martin shkreli to get to. meg tirrell joins us. >> we are here at the brooklyn courthouse where martin shkreli actually just left after being arraigned. we have some video here. it was quite a violent massive scrum, photographers and reporters trying to ask martin questions, how he was going to defend himself and respond to these charges, martin said nothing, kept his head down as he walked to his car. he was surrounded by some security. it did get violent at times, it was very intense scrum there, but martin giving no statement after getting a rind today. just to recap what has happened today, martin shkreli the ceo of turing pharmaceuticals was arrested this morning at his home by the fbi. civil and criminal charges are being brought against him by the department of justice and sec. seven criminal counts, potential
maximum sentence of 20 years in prisonment, saying essentially he defrauded investors at his hedge fund, used his old biotech company retro if i know as his personal piggy bank paying back investors that were disgruntled after a poor performance at msnb amid other charges. he is out on a $5 million bail that was part of the arraignment. his travel is restricted to the eastern and southern districts of new york. the fbi actually just putting out a tweet from their verified account saying no seizure warrant at the arrest of martin shkreli today, which means we didn't seize the wu-tang clan album. so a little comedy coming there from the fbi on this day martin shkreli getting arrested out on $5 million bail, you guys. >> what a circus. carol, do you have thoughts on this one? >> of course i have thoughts on this one, kelly. go figure. i am a big fan of american greed which airs on cnbc.
to me this guy has been a walking episode of american greed in the making just the way that he acts is sort of textbook the case of every episode that i have ever watched and i have actually said to people i sort of expected this to happen maybe ten years from now. i'm shocked that this happened to quickly because usually these things take a while to come to light when you have these kind of situations. that being said, i'm sure that all the light that he has shown upon himself helped to accelerate that. now the question is will the wu-tang album be used as bail or will his lawyer increase his bailey rate by 5,000%. >> in the meantime we appreciate meg tirrell out there in a rainy nasty manhattan day recovering could everything that story for us. time now for a cnbc news update. let's get out to sue herrera. >> ted cruz blasting rifle marco rubio over his sponsorship of the immigration reform bill in 2013. he painted the florida senator
as a supporter of amnesty for undocumented immigrants. cruz telling reporters in las vegas he strongly opposes any legalization measures. israel troops on patrol in the west bank shot and killed a palestinian who they say tried to stab him, at the same time an israel human rights group accused israel security forces of using excessive force when dealing with attackers. israel and turkish officials have reached a preliminary agreements to normalize agreements including the return of ambassadors to both countries. and a christmas display in chicago is getting an awful lot of attention these days. it's a giant letter to an at that as you can see, accompanied by a huge glass of milk, a pencil and plate of cookies. the homeowners say that they were inspired to bring some kindness to others following the mass shooting at sandy hook elementary and that anniversary was this week. that massacre took place three years ago. that is the cnbc news update this hour, kelly, back to you.
yesterday represents its true end of the financial crisis. others suggest there's still work to be done. on the big banks and the quasi government agencies phone as fannie and freddie. joining me now is tim mayopoulos who is ceo of fannie mae. >> thanks for having me. >> the so the federal reserve rate hike yesterday, what ramifications does that have on your business? >> i don't think it's going to have a big impact to tell you the truth. i think this was an expected rate hike and i don't think long-term mortgage rates will go up substantially. so i don't think it will have a big impact on mortgage markets. >> probably a more significant development this week in terms of you guys is the omnibus spending bill which includes provisions which would effectively put an end to the idea of recapitalization in the exit from conservatorship.
would you agree that's a fair assessment of the impact of legislation. >> there has been a huge amount of reform that's happened outside of the lejts lay testify process. at faen we have been focused on addressing a lot of the issues that came up during the crisis. we have imposed new underwriting standards, helped millions of people avoid foreclosure, we've paid $25 billion more back to taxpayers than we took, we've been distributing a lot of the risk that we historically held in our business off of private capital. there is a lot of positive reform that has happened. i think it's good the policymakers are getting back into focusing on what needs to happen to finish the reform process. so if the jump start act helps to actually jump start that debate i think that's a good thing. >> it does look like, though, the potential for that is going away, it is now going to be a couple more years of the status quo. are you going to stick around if fannie isn't transitioning towards being a real fully
private company that's able to stand on its own? >> look, i don't make predictions about the future, but let me just give you a little anecdote. seven years ago this month her be allison was the ceo of fannie mae asked me to come and join the company as then the general counsel. he told me i was going to come for 12 to 18 months because the future was going to be determined in that time. that was seven years ago. since then i've been the chief administrate officer and chief executive officer for three and a half years. so i don't try to predict what the future is going to bring, it's been a great interesting fascinating challenge and i'm excited about the work that we're doing. we've done a lot of great things with this company. >> this comes on the back of there having a veto, if you will, of your ability to receive higher pay for what you're doing so potentially you are going to get up to $4 million you and your colleague at freddie now the highest you will be paid is $600,000. still a pretty good salary, but certainly in order of magnitude
different. i bring up the question of you staying around. here is a quote from the journal after this happened last month, quote, i would be very surprised if tim mayopoulos sticks around at fannie mae for any extended period of time. is it going to be more difficult with these companies with combined 5 trillion signed size that we're talking about to attract the right people to run them in the right way through this now continued purgatory they have been stuck in. >> we have been in this challenging environment for over seven years, we have been very successful at faen in attracting talented people to the company, we have undertaken enormous transformations at our business and been successful at that. we've achieved things that no one thought was possible. no one thought that this company was make $145 billion and send it pack to taxpayers. nobody thought we would undertake the kind of industry leading challenges that we have been doing for the last number of years. i'm not worried about our ability to attract and retain
because because i think people are committed to the mission of this organization. it plays an enormously important role in the national economy and really does make affordable home ownership and rental housing available to millions and millions of people in the country. >> we did ask toll brothers' ceo down yearly the market if fannie and fred were to go away and here is what he had to say about that. >> i don't think it would ever be fine on its own, i think we need government backing of the mortgage business, it's been the way it's been forever and it worked really well except for a couple of really bad years in mid 2005, 2006. i think it will be a change over time, but i think it's going to be done carefully and it's going to be a long-term modest change, right now i don't think the administration or congress is going anywhere near it, but there will be some modest fannie freddie reform, but i think it will be rolled out slowly and i don't think it will have any impact on our business. >> do you think he has that about right? >> so, look, as i said earlier there is already a lot of reform
that's happened, congress has not acted, but in the meantime we've done a lot of things on our own with the supervision of our regularity, the federal housing finance agency. i think in many ways the delay in the legislative process has been good because frankly right after the crisis we would have done some -- the country may have done some very dramatic things, some things that might have ended up being counter productive. i think a slower more deliberate thoughtful process was important, but i do think it's important in the end for legislators to decide what they want to do because we can't remain in this state forever and remain effective. >> we'll leave it right there, tim, thank you so much for moing us, tim mayopoulos is ceo of fannie mae. let's send it over to dominic chu. >> software provider red hat up about 5% in the after hours session, 217,000 shares of after hours trading volume. a decent trade from a volume perspective. this after the company reports earnings per share of 48 cents that beats the ample analysts
estimate by one penny. revenues coming in slightly better, $524 million, the average analysts estimate $522 million. they did offer some mixed current quarter guidance, however, revenue guidance came in slightly above estimates, however, earnings per share guidance came in one penny below. so a mixed picture overall, 5% gain in the after hours session. this stock is up 14% year to date entering this number. also up 33% over the past 12 months. kelly, on the software side of things red hat looks like its beginning to pop on a better than estimated sales report and a mixed q4 forecast. back over to you, kelly. >> thank you, dom. steve, for the future may have been planted at apple today. the driving force behind the apple watch getting a promotion, one that may put him in line to run the company and we will have that story next.
behind the scenes executive at apple is now front and center at the company today and possibly in line to run the tech giant. josh lipton is in san francisco with more. hi, josh. >> well, kelly, jeff williams has overseen apple's entire supply chain since 2010. now he is officially the company's new chief operating officer. williams first joined apple in 1998, played a key role in apple's entry into the smartphone market. also remember super surprised the development of the apple watch. tim cook in a statement saying williams is hands down the best operations executive he has
worked with. other big changes to mention as well, phil schiller will remain apple's haetd of marketing but he picks up a new responsibility as well, he will now lead the company's app store. the natural question is what that change then means for eddie cue, the company telling me he will remain in charge of the company's content. that means apple music, apple pay and apple tv. of course, all these changes, kelly, coming as apple stock has been under pressure. analysts are increasingly cautious about iphoner sales growth in the quarters ahead. rnbc's is monitoring iphone units of 227 million next year and that would be a dip of 2%. still telling me he is an apple bull saying the stock should work on both higher gross margins and average selling prices. back to you. >> thank you, joshua. all right, mike, so do you buy apple against all these changes? what do you think? >> the market didn't. it was down over 2 bucks today,
actually kind of interesting how heavily apple trades. i think the logical take away here is no matter what a lot of these moves might mean, it's going to be a decade probably before we have to really think it means new leadership for this company. tim cook is 54 years old, not going anywhere. i think longer term that kind of question of what apple sees itself as, is it a content company, is it still a gadget company or whatever, that might, i guess, develop over time. >> i don't know, kelly, maybe -- >> what do you think it is, carol? >> maybe they felt apple rushed into this decision because the coo post has only been open since 2011 and we are headed into 2016. i think apple is really lucky, they have a very deep bench as josh mentioned williams has been with the company since 1998 and i think that this is a very strong stock. i know that he just mentioned the analyst who is modeling down units but i like the fact that they're getting into the subscription model and i think that that is something that's going to get people in the habit
of just continuing to pay for phones on a monthly basis, it's going to continue the turnover, even maybe when there isn't some innovation. given the amount of cash they have on the balance sheet, given where the pe multiple is, i mean, to me it seems like a good value here. >> we will leave it right there. we will come back in just a moment. we will speak to former nc commissioner david stern and talk to him about the future of daily fantasy sports. stay with us.
>>. >> bill walton called david stern, quote, the single most important person in the history of basketball. in 1994 before he became nba commissioner, the value of the team totalled $400 mchlt today after he stepped down from the league, the franchises are worth more than $20 billion. we welcome david stern to "closing bell." >> thanks for having me. >> a lot to talk about, including what you've been up to in the meantime. probably the biggest debate is whether betting on daily outcomes and daily players should be allowed. should daily fantasy sports be allowed? >> why not?
i understand a state might wish to regulate them, and that's good, but i don't have any problem with fantasy as an occupation. i think fans enjoy it, but i can understand whether the state decides whether they want it or not, that's a state decision. >> do you think gambling on sports is bad but this isn't gambling? >> actually, this is not gambling because 1% of the people make 90% of the money. that tells you it's skill-based. beyond that, i think it's time to legalize gambling because we're seeing so much of it go offline and bet illegally. now that fantasy is being played all over the united states, why not legalize gambling, as well? >> let me make sure i'm understanding this. >> i'm dancing as fast as i can. >> this is significant. in the past there is this sense gambling brings corruption into
the sport. do you think that's not the case and we should legalize daily fantasy in all types of sports? >> i don't think it brings corruption. corruption has to be guarded against no matter what if somebody bets $40 billion or $100 billion illegally, the same risk of corruption is there. my own view is that you need federal legislation for both oversight and for not having leagues deal with 50 different states. >> let me bring in carol. >> it's carol ross. i'm a big proponent of daily fantasy sports. not only do you think all gaming and online gaming should be legal, i particularly think daily fantasy sports is a game of skill. could you make the argument that what the participants are doing on a daily basis is not that much different, maybe on a smaller scale, than what the gms do? you pay gms $1 million to $3 million a year to crunch the numbers, figure out the matchups who fits in a system. isn't that really what the
participants are doing? >> no, no, no. you're confusing that with betting on stocks and dealing in the stock market. okay? i think that you're right about analytics being used much more but that's actually skill-based, not chance-based. i think fantasy is the same as that, but it should be legal. i'm going to sit here until kelly agrees that the nba teams are not worth $20 billion but are worth $40 billion. >> i'd like to know how much you think the 76ers are worth and why that strategy should be allowed. they are doing terribly. what is the value of that team? >> i think the value is unchanged. it's worth something around at least $1 billion. they've made recent changes that i think will just continue to increase the value of that team. >> we talked about your successes. do you have any major regrets about your time, tenure at the nba? >> i don't. i had a great time. i had the best job in the world and i did what i think many
successful ceos dream about. i left the sport in the hands of someone who is doing a great job. his only misfortune was you work with people 21 years in five jobs and they all reported to me. adam silver is a great ceo, a great commissioner. i'm enjoying watching his success. >> we've got to check back in with you and talk about maybe running for mayor and whether you're bored now that you're done with all of this. >> i am not bored. i'm having a great time. i'm not retired. i'm rewired. >> david stern, thank you so much for joining us. >> thank you. >> really appreciate it. happiest place on earth got more secure using metal detectors to screen random guests. one of the new safety measures at disney's theme parks. we'll go there live after this. . sup jj? working hard? working 24/7 on mobile trader, rated #1 trading app in the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of the other
if you want to visit mickey mouse's house, you may have to pass through a metal detector. jane wells is live at disneyland. >> reporter: i went right up to it. did it anyland has been checking bags for some time now. starting today it randomly selects people to go through metal detectors. those are the pop-up metal
detectors behind the guy checking bags. there's more security dogs here. it's the same at disney world in orlando. disney is banning the sale of toy guns in the park. there was no specific threat but the company is responding to the world we live in. >> the lines are a little bit longer because i think checking everything thoroughly. >> you had to wait in a longer line to get in. they're more looking through your bags more compared to yesterday and the day before. >> it's sad we need our backpacks checked, but if it keeps everybody safe, it's great. >> disney is not alone. universal studios hollywood is expanding the use of metal detectors there. lego land is also ramping up security. no one can wear a full costume into the park. we are hearing from movie
theaters that at the screening of "star wars" tonight, a disney film, some people cannot wear masks to the theater. nothing in particular, just a general sense of security. >> as you said, the world we live in. thank you to jane wells. before david stern left a moment ago he said, i can't believe that this isn't already common. you need to go through a metal detector to get in a sporting event these days. and for a lot of concerts, too. i wonder if disney could go further. >> you would think so. obviously, disney is sensitive to keeping the lines down. it's one of the main drawbacks of the experience at the park. also the park's -- they obviously have gates but they bleed into the landscape a little bit. maybe they would be forced to do something like that at some point. fortunately, i guess, no incident has pushed them in that direction farther. >> to costumes, carol. >> it's so funny. that is exactly way was
thinking. that's unfortunate. when you go to disney, it is an experience and it's unfortunate that has to be taken away. i guess some people would be willing to give that up to feel safer. i'm not one that likes to give up liberties, but so be it. >> i think the minnie mouse ears are still allowed. i'll wear mine next time. thank you for joining me here on the "closing bell." "fast money" begins right now. "fast money" starts right now. live from the nasdaq market site overlooking new york city's times square, i'm melissa lee. tonight on "fast" gold nearing multiyear lows and on the cusp of doing something it has not done since 1998. while gold's pain is about to get worse. what has gold bugs freaking out. and martin shkreli ouon